Monthly Archives: April 2015

Local Lodging May Be Deductible

Local Lodging, conference expenseHave you ever thought of local lodging as a business expense? A business deduction is allowed for lodging when a taxpayer travels away from his or her “tax home.” A taxpayer’s tax home is generally the location, such as a city or metropolitan area, of a taxpayer’s main place of business. It is not always defined as the place where he or she lives.

The traveling away from his or her tax home condition creates problems for individuals attending conferences and training sessions within their tax home area. These may include extended-hour events that prevent traveling back home between the days of the events.

What Does the IRS Say?

To alleviate this problem, taxpayers may rely on IRS proposed regulations. These regulations permit certain non-away-from-home lodging expenses. These expenses include local lodging, to be treated as deductible business expenses by employers. This also includes tax-free working condition fringe benefits or accountable-plan reimbursements to employees. Under the proposed regulations, local lodging expenses are treated as ordinary and necessary business expenses. If all of these conditions are met:

  1. The lodging is necessary. The individual who participates is fully in or mus be available for a bona fide business meeting, conference, training activity, or other business function.
  2. The lodging is for a period that does not exceed five calendar days.
  3. The lodging does not recur more frequently than once per calendar quarter.
  4. The event requires overnight attendance by the employer. If the individual is an employee, the employer requires the person to remain at the activity or function overnight.
  5. The lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation, or benefit.

Local Lodging Deduction Example

A business conducts business-related sales training sessions at a hotel and conference center near its main office. This is local lodging. The employer requires both its field and in-house sales force to attend the training. The employer requires the team stay at the hotel overnight for the bona fide purpose of facilitating the training.

If the company pays the local lodging costs directly to the hotel, the stay is a working condition fringe benefit to all attendees. This is true even to employees who live in the area who are not on travel status. The company may deduct the cost as an ordinary and necessary business expense.

If the employees pay for the lodging costs and are reimbursed by the company, the reimbursement is of the accountable plan variety. The local lodging is tax-free to the employees and deductible by the company as an ordinary and necessary business expense.

Example: If Warren, a locally based, self-employed consultant, is required by a client to attend the sessions and stay at the hotel. The hotel is local lodging for him. Warren is permitted to:

  1. Deduct the expense, if he paid for it himself, or
  2. Exclude the expense, if he were reimbursed by the company after accounting for it in full for his costs.

Substantiation requirements

Generally lodging expenses are deductible only if they are substantiated in full. This means record of time, place, amount, and business purpose, plus paid bills or receipts. The expenses cannot be substantiated using the lodging component of the federal per-diem rate.

Questions about Local Lodging?

If you have questions about the deduction and substantiation of business-related lodging expenses, please give Alex a call at 781-849-7200. He can go over the criteria with you and help you to know you are in compliance.

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Tax season has gone, but you can still file for an extension.

Call Alex Franch, EA at 781-849-7200 for your appointment and learn about ourextension discount here.

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photo credit: GRDevDay 2015 via photopin (license)

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Tax Break for Sale of Inherited Property

2015_04_22 Tax Break for Sale of Inherited PropertyPeople who have inherited property are often concerned about the taxes they will owe on any gain from that property’s sale. After all, the property may have been purchased years ago at a low cost by a deceased relative but may now have vastly appreciated in value. The usual question is: “Won’t the taxes at sale be horrendous?”

Clients are usually pleasantly surprised by the answer. Special rules apply to figuring the tax on the sale of any inherited property. Instead of starting with the decedent’s original purchase price to determine gain or loss, the law allows taxpayers to use the value at the date of the decedent’s death as a starting point. Sometimes an alternate date is chosen. This often means that the selling price and the inherited basis of the property are practically identical. There is little, if any, gain to report. In fact, the computation frequently results in a loss, when it comes to real estate that is subject to large selling expenses such as realtor commissions, etc.

Certified Appraisal of your Inherited Property

This also highlights the importance of having a certified appraisal of the home to establish the home’s tax basis. If an estate tax return or probate is required, a certified appraisal will be completed as part of those processes. If not, one must be obtained to establish the basis. It is generally not acceptable just to refer to a real estate agent’s estimation of value or comparable sale prices if the IRS questions the date of death value. The few hundred dollars it may cost for a certified appraisal will be worth it if the IRS asks for proof of the basis.

Deductible or Not?

Another issue is whether a loss on an inherited home is deductible. Normally, losses on the sale of personal use property such as one’s home are not deductible. However, unless the beneficiary is living in the home, the home becomes investment property in the hands of the beneficiary. A loss is deductible but subject to a $3,000 ($1,500 if married and filing separately) per year limitation for all capital losses with any unused losses carried forward to a future year.

In some cases, courts have allowed deductions for losses on an inherited home if the beneficiary also lives in the home. In order to deduct such a loss, a beneficiary must try to sell or rent the property immediately following the decedent’s death. In one case, where a beneficiary was also living in the house with the decedent at the time of death, loss on a sale was still deductible, when the heir moved out of the home within a “reasonable time” and immediately attempted to sell or rent it.

What Changes are Ahead for Inherited Property?

This tax treatment could change in the future, however. The President’s Fiscal Year 2016 Budget Proposal includes a proposal that would eliminate any step up in basis at the time of death and would require payment of capital gains tax on the increase in the value of the home at the time it is inherited.

Looking for tax information about inherited Property?

Perhaps you are settling an estate and have a home you inherited? We will provide accurate tax information for you. WorthTax are tax experts. Maybe you are in a bind and you did not make the deadline to file your taxes. We can help, even with past years. Contact this office at call Alex Franch, BS EA at 781.849.7200 for assistance in planning your real-estate transactions. Worthtax has locations in Quincy, Weymouth and Dedham.

Sources and Resources to Sell Inherited Property?

 

 

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Unclaimed Refund: Are You Leaving Tax Money On The Table?

2015_04_15 Unclaimed Refund2Do you have an unclaimed refund? Each year the IRS reports about $1 billion in unclaimed refunds for individuals who did not file a tax return. The IRS estimates that approximately half of the unclaimed refunds are for amounts greater than $600. You may not have filed, thinking that because you don’t itemize and your employer is withholding tax that you don’t need to file. But there is a good chance you are leaving money on the table by not filing. Consider the following:

  • Over-Withholding – Your employer may have withheld more than you owe, as withholding is not an exact science. But you have to file to get the excess back.
  • Earned Income Tax Credit (EITC) – An EITC is a credit for lower-income taxpayers. If you worked and earned less than $52,427 last year, you could receive the EITC as a refund if you qualify with or without a child. The credit can be as much $6,143 and is fully refundable. This is a very lucrative credit, but you have to file to benefit from it.
  • Child Tax Credit – If you have at least one child under the age of 17 you probably qualify for the Child Tax Credit. Generally this credit is non-refundable. It can only be used to reduce taxes owed. However, if you work, your income is low to moderate and you don’t use the full credit amount to offset taxes, a portion of the $1,000 per child credit may be refundable.
  • American Opportunity Tax Credit (AOTC) – The AOTC is available for four years of post-secondary education expenses and can result in a credit of up to $2,500 per eligible student enrolled at least half time for at least one academic period during the year. Up to 40% of the credit is refundable, so even if you don’t owe any taxes, you may still qualify for the credit. But to claim the credit you must file a return.
  • Premium Tax Credit (PTC) – If you acquired your health insurance last year through a government marketplace, you probably qualify for an insurance subsidy in the form of the PTC. But you have to file to get the credit. If you received the PTC in advance to reduce your premiums, as did most individuals who used a health insurance marketplace, you must file a tax return and reconcile the advance PTC against the actual PTC.

If you have not filed in the past, the statute of limitations for a refund is 3 years from the unextended due date of the return. If you have a refund coming for past years you should file before the statute expires. For example, to claim a refund for a 2011 return you will need to file the 2011 return no later than today, Wednesday, April 15, 2015, or the refund is gone forever.

An Unclaimed Refund is a Terrible Thing to Waste

Do you have any unclaimed refund? We want you to get ALL your money. WorthTax has expertise in preparing tax returns for all years, including past years. Please contact this office at 781-849-7200 for assistance so you can get the refunds you are entitled to.

Maybe you know someone who can benefit from this information, feel free to share:
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Tax season has gone, but you can still file for an extension.

Call Alex Franch, EA at 781-849-7200 for your appointment and learn about our extension discount here.

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Tax Filing Deadline Rapidly Approaching

Tax Filing DeadlineThe tax filing deadline is in one week away. This is just a reminder to those who have not yet filed their 2014 tax return. The due date is April 15, 2015. This means you need to either:

  1. File your return and pay any taxes owed, or
  2. File for the automatic six-month extension and pay the tax you estimate to be due.

In addition, the April 15, 2015 tax filing deadline also applies to the following:

  • Tax year 2014 balance-due payments – Taxpayers that are filing extensions are cautioned that filing an extension is only that – an extension to file. It is NOT an extension to pay a balance due. Late payment penalties and interest will be assessed on any balance due. This is true even for returns on extension. Taxpayers expecting to owe money, should estimate the balance due and include the payment with the extension request.
  • Tax year 2014 contributions to a Roth or traditional IRA – April 15 is the last day contributions for 2014 can be made to either a Roth or traditional IRA. This is true regardless if an extension is filed.
  • Individual estimated tax payments for the first quarter of 2015 – Taxpayers, especially those who have filed for an extension, should note that the first installment of the 2015 estimated taxes are due on April 15. If you are on extension and anticipate a refund, all or a portion of the refund can be allocated to this quarter’s payment on the final return when it is filed at a later date. If the refund won’t be enough to fully cover the April 15 installment, you may need to make a payment with the April 15 voucher. Please call this office for any questions at 781-849-7200.
  • Individual refund claims for tax year 2011 – The regular three-year statute of limitations expires on April 15 for the 2011 tax return. That means that NO refund will be granted for a 2011 original nor amended return that is filed after April 15th.

Caution: The statute does not apply to balances due for unfiled 2011 returns.

If one of our locations is holding up the completion of your returns because of missing information, please forward that information to us as quickly as possible. This is in order to meet the tax filing deadline of April 15 deadline. Please keep in mind that the last week of tax season is very hectic. Your returns may not be completed if you wait until the last minute. If you have reason to believe the information will not be available in time for the April 15 deadline, then call us right away. This is so an extension request can be prepared, as well as any necessary 2015 estimated tax vouchers that may need to be filed.

Tax Filing Deadline? Whose responsibility is it to file?

Of course, we will do all we can to assist you. However, the IRS and the Commonwealth of Massachusetts holds the taxpayer responsible to have all the information available and ready to file the tax return. If the tax filing deadline cannot be met, and the taxes forms cannot be ready in time, it is the taxpayers responsibility to contact your tax preparer and request that an extension be filed. Also the taxpayer is responsible to submit a check for the estimated payment.

If your returns have not yet been completed or you are not ready for the tax filing deadline, please call our office at 781-849-7200 right away so that we can schedule an appointment and/or file an extension if necessary.

Maybe you know someone who can benefit from this information, feel free to share:
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